Digital Musings

Beware: Eliot Spitzer blogs!

Never heard of Eliot Spitzer? Well just ask Merrill Lynch, Citigroup's Sandy Weill, Franck Quattrone, the US mutual fund industry and now the US insurance and brokerage industry, they'll tell you right away (unless they run away very very fast!).

If you want to know more about Spitzer, read this

The RSS feed to Spitzer's blog is here .

Spitzer's blog does not cover the finance, banking and insurance litigation cases he is involved in. For obvious reasons. Yet his blog is a good way to get a better understanding of how the man works and reacts (admittedly his posts are and will be "cautious" as he is running for Governor in 2006 and his blog is a way of raising funds) .

Old wine in new bottles?

Just read the October issue of Business 2.0. Its cover says "The New Road to Riches: How to get ahead in a postbubble world: Build a company. Flip it fast. Repeat."

Flip it fast looks like wishful thinking: It is rather obvious to me that everybody dreams of meeting the nice guy who gonna put $ x millions on the table to buy one's start-up just after a few months of existence. More seriously the notion of "flipping it fast" shall not come as the ultimate objective but as some kind of litmus test whereby you try to figure out whether what you work like a dog for makes sense or is just condemned to failure. This is one of the many benchmarks that call you back to reality. Again can't be an objective per se: As John Kay has it "goals are most likely to be achieved when pursued indirectly."

In any case, here is what Business 2.0 has to say about "The Rules of the New Road":

1. Get Real: Don't obsess on creating a revolutionary....the next Microsoft
2. Go Cheap: Buy used computers etc....
3. Forget the VCs: They're still stingy these days... (wonder what Marc Goldberg would say...)
4. Spread the Word: Milk contacts...
5. Know when to fold'em: in a nutshell 2 years...

Sounds like old wine in new bottles to me. I am not sure this road is that new.

Well, as the saying goes, as long as there is hope....and luck....and....

A new breed of future managers: Video Gamers!

Most parents worry about their kids spending far too many hours playing video games. Teachers complain that this game time is taken at this expense of proper studying. Medical doctors argue that this video game addiction may not be good to kids' health.

So, is that true the video gamer generation is doomed? Well, according to John C. Beck and Mitchell Wade, co-authors of Got Game: How the Gamer Generation Is Reshaping Business Forever (HBS Press 2004), the issue deserves more careful consideration. They depict a situation which is far more balanced and promissing than what conventional wisdom would suggest. Video gamers are not loners, they are team players. Video gamers are creative, they permanently look for innovative shortcuts. Video gamers are familiar with new technologies, they use them intensively. Video gamers are not afraid to talk to people they don't know, cold calls are not an issue for them. They share knowledge. Video gamers know that heavy hierarchies are not conducive to problem solving, quite the opposite. Video gamers know the power of networks, they use them to overcome difficulties. Video gamers are not lazy. They are resilient, hard-working provided the environment (the game) is fun and challenging. Video gamers do know what failing means even if you can argue they only know about virtual failures. None the less, they feel the pain and know how to rebound.

Again, as usual, Cassandras tend to talk too fast. Not to say that all is rosy, with no negative points whatsoever. But, overall, I tend to agree with Beck and Wade that the punchline is rather positive (my son and my daughter do surprise me everyday!) and firms won't be and act the same with this new breed of video gamers-managers.

By the way, the book title could have been: Got Game, Got Blog: How the Gamer/Blogger Generation is Reshaping Business Forever. Maybe for the next edition!

An interesting interview of the two co-authors is here.

To give you a first flavour of the book content, I extracted two questions/answers from an HBS Working Knowledge interview of the two co-authors:

"Q: How have video games changed the way this generation views the business world?

A: Gamers approach the business world a bit more like a game. They see the different companies—and maybe the people they work with—as "players." They're way more competitive and are very passionate about "winning." They are both more optimistic and more determined about solving any kind of problem you can imagine; they think there's always going to be some combination of moves that will result in success. That drives them to be incredibly creative. They're a bit suspicious of company leaders: The game world is not big on following hierarchy. Plus, they are very confident. Like entrepreneurs, they would rather rely on their own abilities to succeed or fail. They're also more comfortable with risks, but aren't reckless.

Q: What's the danger for boomer managers who don't understand the gamer generation?

A: Boomer managers are leaving a LOT of value on the table, value that their competitors may not have seen yet, either. Gamers aren't just OK; they have some strengths that weren't standard in our generation. They can be almost maniacally dedicated and productive; for them, solving the problem can be a pleasant obsession like games were.

And as they come to dominate the workforce, anyone who doesn't understand them will become increasingly isolated. Imagine Ward Cleaver trying to manage in today's boomer-centric world. We're moving towards a more gamer-centered universe, both from a marketing and a management perspective. Boomers who don't understand the transition will run the risk of being left behind, unable to adapt. They'll either be trying to sell to people using completely wrong language, or they'll be trying to train using boring old methods like in classrooms and lectures. Either way, if they fail to adapt, they're going to waste a lot of the shareholders' money sticking to methods that don't work anymore. "

If you'd like to read more but don't know whether you are willing to buy the book or not, here is a Download preview.pdf

If you are convinced this book is a good/must read, the purchase link is here (I should think getting some commissions from the Harvard guys!).

More on kids, video games and gamers in Cyberlibris:

BRANDchild: Insights Into the Minds of Today's Global Kids, Martin Lindstrom, Kogan Page, 2003

Generations at Work: Managing the Clash of Veterans, Boomers, Xers, Nexters in your Workplace, Ron Zemke et alii, AMACOM, 1999

Differentiate or Die: Survival in our Era of Killer Competition, Jack Trout and Steve Rivkin, John Wiley & Sons, 2000

Future Marketing: Targeting Seniors, Boomers and Generations X and Y, Joe Marconi, McGraw-Hill, 2000

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Either/Or: Leaving money on the table

Have you ever noticed that we have a marked tendency to view bargaining situations as a zero-sum game: What you gain is what I lose and vice-versa. We bargain over positions and hope that our position will dominate at the expense of the position facing us. Just think of divorce settlements, international negotiations (USA and former USSR, Israel and Palestinia), etc...

In their insightful book "Getting to Yes : Negotiating an Agreement without Giving In" (a good summary is here), Roger Fisher and William Ury have a nice way of reminding that we should avoid as much as we can falling into the either/or trap.

The story goes as follows: Two sisters quarrel over an orange. Each of the sister would like to get the full orange. After a painful position bargaining, they end up cutting the orange in two halves. The first sister takes her half, peels the orange, throws the peel away and eat her half. The second sister peels her half, throws the inside away and uses the peel in baking a cake. What a shame: Both have left money on the table! They only thought of dividing the orange, of fighting for the maximum share instead of inventing a new option for mutual gain. The option was obviously to tell each other what the purpose of the orange was before starting to negotiate over it.

Inventing options is indeed usually mutually profitable. As Fisher and Ury put it: " In a complex situation, creative inventing is an absolute necessity. In any negotiation it may open doors and produce a range of potential agreements satisfactory to each side. Therefore, generate many options before selecting among them. Invent first; decide later."

One example from the blogosphere that springs to mind is that of Loïc Le Meur when he sold the company he founded, Rapid Site France, to France Telecom. The full story is here. In a nutshell, Loïc was in a position where he could have sued France Telecom for advertising plagiarism. He did not choose that obvious route and took that unexpected opportunity to discuss business with the Wanadoo guys who ended up buying his firm! Too bad for the litigation lawyers but great for both Loïc and Wanadoo!

So next time you have something to negotiate, think out of the (positions) box and allow you and your partners more room for manoeuvre.

More on "business negotiating" in Cyberlibris:

50 Best (and Worst) Business Deals of All Time, Michael Craig, Career Press, 2000

Game, Set, Match: Winning the Negotiations Game, Henry S. Kramer, ALM, 2001

Only Negotiating Guide You'll Ever Need, Peter B. Stark, Broadway Books, 2003

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The Purple Cow and the Garden Dwarfs

"You're either a Purple Cow or you're not. You're either remarkable or invisible. Make your choice.

What do Starbucks and JetBlue and KrispyKreme and Apple and DutchBoy and Kensington and Zespri and Hard Candy have that you don't? How do they continue to confound critics and achieve spectacular growth, leaving behind former tried-and true brands to gasp their last?

Face it, the checklist of tired 'P's marketers have used for decades to get their product noticed -Pricing, Promotion, Publicity, to name a few-aren't working anymore. There's an exceptionally important 'P' that has to be added to the list. It's Purple Cow.

Cows, after you've seen one, or two, or ten, are boring. A Purple Cow, though...now that would be something. Purple Cow describes something phenomenal, something counterintuitive and exciting and flat out unbelievable. Every day, consumers come face to face with a lot of boring stuff-a lot of brown cows-but you can bet they won't forget a Purple Cow. And it's not a marketing function that you can slap on to your product or service. Purple Cow is inherent. It's built right in, or it's not there. Period." (Drawn from Seth Godin ' Purple Cow book description; translated into French: La Vache Pourpre, Maxima, 2004).

I f you've never read a book by Seth Godin, the Purple Cow is a good start. Godin has an innate way of making you think out of the box: Don't expect something academic, expect good sense and a great sense of humor too. If you run your own business, I bet you will keep wondering whether your business is a purple cow, how to make it a purple cow.

This reminds me of the interview of a German manager whose family had been manufacturing garden dwarfs for centuries. Some twenty years ago, it was his turn to run the show. At the time, he said he hated the idea: How can you be successful with girls, he said, when they realize that you're in the business of garden dwarfs! Now, he loves it and has developped a genuine understanding of the garden dwarfs market. The one thing he did recently is to produce a brand new rather unexpected kind of dwarf.

As you may imagine, even if there are more and more garden dwarfs aficionados (including French designer Phillippe Stark, most people tend to laugh at people who put garden dwarfs in their garden. They find it ridiculous, ugly what have you... This is obviously something that may hurt business. Well, what the German firm did was to design a new dwarf: The garden dwarf that has been killed by the neighbour. Imagine a dwarf, lying down, face (and beard) on the ground, with a knife deep in his back. This dwarf is a killing. The firm has sold tons of them.

Why? Well, it sounds to me that this dwarf is a kind of purple cow. The dwarf design is a fun and astute way of generating cash-flows out of the love-hate feelings that garden dwarfs trigger. You hate them, show it, buy a killed one. You love them and want to make fun out of your neighbour, buy one too!

More by Seth Godin in Cyberlibris:

Permission Marketing, Maxima

Marketing Viral, Maxima

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Nothing is sacred: Robert J. Barro and the Dismal Science

I am currently reading Robert J. Barro's latest book: Nothing is Sacred: Economic Ideas for the New Millenium (2002) (French translation: Rien n'est sacré!, Economica). Robert J. Barro is the Robert C. Waggoner Professor of Economics at Harvard University. He is one of the most famous living economists.

To make a long story short he is best known for his works on economic growth and on the budget deficits. On the economic growth side, he came up with the idea of convergence which was afterwards publicized under the "iron law of convergence" (more on this here). Simply described, convergence is a catch-up phenomenon. Under certain circumstances (remember how cautious economists are; they know all too well that the devil lies in the details!!!), backward countries tend to grow faster than rich countries, thus closing gradually the gap between them.

On the budget deficit side, he extended the notion of "Ricardian equivalence". Ricardian equivalence is an intuitive, though controversial theory, which suggests that government budget deficits do not affect the total level of demand in an economy. Indeed, there is no such thing as a free lunch: Either the goverment finances its extra spending either by raising new taxes or by increasing its budget deficit (namely borrowing). What Ricardo and Barro say is that people, you and me, are not fooled by the governmental choice and realize that the government choice boils down to "Tax now or tax later". If borrowing (tax later) is chosen, we, citizen, know that we are going to have to pay taxes later and, hence, save now the present value of these taxes. The outcome is that we won't increase our spending. This equivalence is reminiscent somehow of the Modigliani-Miller theorem on corporate financing that says (again under certain assumptions!) the way a corporation finances its operations (equity or debt) has no impact on its value.

The reason why I got attracted by "Nothing is Sacred" is a rather "incidental" one. Indeed, in many lunches or dinners I may have with relatives and friends, the discussion quite often drifts towards the "dismal science", namely economics. Whether we talk about environment, sustainable growth, inequality, poverty, publishing, health etc... I usually argue that a lot of insights can be gained by using economic tools to re-interpret the issues at hand. They help clarify the topic and help understand the underlying metrics people are using making choices (even if they are unwilling to confess or to admit that they use such metrics). What happens then is that I am under a heavy fire of criticisms: How dare you put a number on everything? How dare you measure things in terms of costs and benefits? IS NOTHING SACRED TO YOU?

Here we are! So, now you understand why Barro's book is appealing to me, the same way the works of University of Chicago Professor of Economics and Nobel Prize winner Gary S. Becker and of Milton Friedman's son, David D. Friedman, were to me (read The Economics of Life and Hidden Order, this is first-class!).

One chapter in Barro's book summarizes it all: The economic analysis of beauty. Barro says that the only true measure of productivity is the additional satisfaction that a worker brings to the client (that is what the client is willing to pay for) and to the welfare of his or her fellow workers. Hence, the physical appearance (if it matches the productivity litmus test) is as legitimate a qualification as shrewdness, dexterity etc... I know, I know I can already hear you screaming: politically incorrect, nasty, discriminatory and so on and so forth...

You know what: I am still puzzled that people keep screaming at the dismal science. They simply refuse giving it a try. That's sad because economists think this way precisely because they care about the details. That may be a strange way of showing "compassion" but, believe me, that's what it is!

By the way do not believe that I buy Barro 100%. In many occasions I find him candid!

When the Ivory Tower sticks its neck out...

The presidential race between George W. Bush and John Kerry is rather buoyant. The outcome is still highly uncertain. Among the issues that are fiercely debated is the current state of the US economy. President Bush's economic policy has been under attack for a while now. The critics are now joined by a squad of famous and respected scholars who have addressed the following open letter to President Bush:

"Dear Mr. President:
As professors of economics and business, we are concerned that U.S. economic policy has taken a dangerous turn under your stewardship. Nearly every major economic indicator has deteriorated since you took office in January 2001. Real GDP growth during your term is the lowest of any presidential term in recent memory. Total non-farm employment has contracted and the unemployment rate has increased. Bankruptcies are up sharply, as is our dependence on foreign capital to finance an exploding current account deficit. All three major stock indexes are lower now than at the time of your inauguration. The percentage of Americans in poverty has increased, real median income has declined, and income inequality has grown.

The data make clear that your policy of slashing taxes – primarily for those at the upper reaches of the income distribution – has not worked. The fiscal reversal that has taken place under your leadership is so extreme that it would have been unimaginable just a few years ago. The federal budget surplus of over $200 billion that we enjoyed in the year 2000 has disappeared, and we are now facing a massive annual deficit of over $400 billion. In fact, if transfers from the Social Security trust fund are excluded, the federal deficit is even worse – well in excess of a half a trillion dollars this year alone. Although some members of your administration have suggested that the mountain of new debt accumulated on your watch is mainly the consequence of 9-11 and the war on terror, budget experts know that this is simply
false. Your economic policies have played a significant role in driving this fiscal collapse. And the economic proposals you have suggested for a potential second term – from diverting Social Security contributions into private accounts to making the recent tax cuts permanent – only promise to exacerbate the crisis by further narrowing the federal revenue base....

To be continued Download open_letter_to_the_president.pdf

This letter has not been written by some obscure scholars. The list of signers is rather impressive and includes some heavyweights of the academic profession: Robert C. Merton (Harvard and Nobel Prize Winner), John W. Pratt (Harvard), Birgen Wernerfelt (MIT), etc... The Ivory Tower is often criticized for tackling issues that have nothing to do with real life (whatever real life may mean). This time, it sticks its neck out. Interstesting to see whether it is going to be listened too. At least, this letter should make an interesting material for economics classes.

By the way it is interesting to see that there seems to be a longstanding tradition of open letters to US Presidents. One example among others is the open letter John Maynard Keynes, the famous British economist, wrote to President Franklin D. Roosevelt.

I may be wrong on this one but it does not seem that French economists voice their concerns to the President in the same open manner.

Management Pornography

The more I go, the more I see pornography in management literature. Not convinced! Well, just candidely think of the type of titles a lot of business books carry these days (the following titles are fake/invented ones but quite similar to true ones): "Ten best stocks for the millenium", "The best kept secrets of top CEOs", "Managing like XXX", "XXX on successful leadership" etc...

I do not mean that all these titles necessarily relate to poor books. What I mean is that most of them don't challenge us into deep thinking. They take for granted that it is easy to disentangle skill from luck.

But let me ask you: How do you do that? Is Warren Buffett skilled or lucky (remember tossing a coin may end up with 15 heads in a row with a non zero probability)? How do you recognize a skilled VC from a lucky one? Are not we too often tempted to rationalize ex-post? Is luck that scary that we need skill as an explanation for what we don't want to see as Lady Fortune's hand!

Look before you leap...John Kay on academic copyright

John Kay is upset. To say the least. Why? Against whom? Well, here are the first lines of his article dated Oct. 5th, 2004:

"My sceptical article on copyright in June provoked a furious reaction from industry lobbyists. Some correspondents even emphasised the personal benefit I derive from the protection of my intellectual property. So I was intrigued to receive a standard form contract for an article from a leading publisher.

The company seeks the exclusive right to produce, publish, store or copy the article, or any derivative of it, throughout the universe, and in every form or format now known or hereafter invented. So eat your heart out, extra terrestrials, if you have one: even if I acquire the capacity to communicate my ideas to you telepathically, I have relinquished the right. Do not expect to hear from me on the other side: this commitment extends for 70 years after my death...." To be continued here

This is an interesting piece indeed which raises the whole issue of the business, hence legal, relationship of an author to his or her publisher. Having a book published, especially by a leading publishing house, is a flattering experience. Having myself (co)-authored and published books, I know the feeling. However, the thrill of being published should not prevent the author from aiming at signing a balanced contract. An author contract is nothing but a portfolio of rights that are (theoretically) going to be monetized by the one (the publisher) to whom they are assigned. In other words, these rights are options on various future businesses (among other things digital, movie, copy, education etc...) that may or may not materialize.

These options should be ex-ante assigned to the one who is best placed and best motivated to try to have them one day exercised. This is why authors should look at these rights/options carefully and discuss with the publisher if and how they are going to be monetized. Indeed, it would be a strange idea to give up rights to a publisher who does not intend to take advantage of them.

This does not mean that the contract negotiation is deemed to be conflictual. Exactly the opposite! The idea is to make sure that any "business" opportunity will be given serious consideration.

Blogs are a vivid example of why this new balanced relationship is indeed badly needed. Usually the digital rights are viewed as derivative rights. The primary right being the one associated to having the book published in a Gutenberg format. Now, more and more books are drawn from blogs which means that the digital format came first. This is good news by the way since it means that the forthcoming book has already established its reputation in the so-called blogosphere. Think for instance of David Weinberger and his recently published "Small Pieces Loosely joined". Weinberger made an intensive use of a blog to write his book. So, talking about a primary right and a derivative right is just like debating about who comes first, the chicken or the egg.

Punchline: Next time you want your book to be published, look before you leap!

Google Print...or how to monetize your free right to flip through the pages

The publishing industry is going through interesting times. Good old Gutenberg must be turning in his grave. Indeed, it is a stimulating experience to see the North-American publishing industry going digital without really going digital. The latest event in this saga is the Google Print initiative whereby, through Google, publishers will allow readers to flip through the pages of newly released books (they say roughly 20% of the book). The basic idea is to give readers a better sense of whether they should go for the book, that is buy it. Google's idea is to combine the viewing of a given page with their Adsense contextual advertising program. Publsihers will then receive a share of the ad revenues based on the number of Adsense clicks that we, readers, gonna trigger.

Interesting! This mimics what we're allowed to do for free in a bookstore (where sometimes we can even enjoy a sofa and a cup of coffee (Starbucks?)), that is making our mind about the book while sipping coffee and flipping through pages. We can do so even if we don't buy the book and decide to leave the bookstore without opening our wallet. The clever trick here is an indirect re-monetization of this free right: Publishers gonna be paid when we flip through the pages AND click on Adsense boxes.

Now, I have some questions that spring to my mind. What's the deal for authors? Will they get their cut? Is this to be considered as a derivative right to be compensated for. Next is the question of why Google takes the burden of scanning the books instead of relying upon the available electronic files that are nowadays provided by publishers.

Mmmmhhhh!!! Is this Big Brother striking again? Are we going to leave even more footprints? Frankly I do not know what to think even though Google claims that they are good guys with no intention of profiling us whatsoever.

Do you really believe them?